The chances of a crash in house prices are not high, but some controls on lending are needed, according to new Reserve Bank Governor Adrian Orr.
Mr Orr began as the central bank's new governor last month after ten years heading the New Zealand Superfund.
Photo: NZ Super Fund
Speaking to Nine to Noon's Kathryn Ryan, he talked about changes at the bank, the risks on the horizon for New Zealand and where interest rates might go.
Listen
He said the reasons for the stretched housing market were clear, including strong immigration and lack of supply.
He said loan-to-value-ratio lending restrictions were likely to be a permanent feature of the market, although the levels would vary.
However, Mr Orr said lending banks had to play their part in keeping the market under control.
"Banks need to far more responsibility around are they lending to people who are able to afford through a sustainable basis through time."
Mr Orr said householders and investors also needed to consider whether they were putting all their financial eggs into one basket when it came to the housing market.